Inflation Preview: June CPI Set to Increase on Higher Transport and Food Inflation

Inflation set to rise. We expect headline inflation to rise to 3.4% y-o-y in Jun from 3.1% in May, with monthly inflation picking up to 0.50% m-o-m from 0.07% in May (Exhibit 1). Core inflation is likely to increase slightly to 2.7% y-o-y from 2.6% in May, with monthly core inflation increasing to 3% m-o-m from 0.2%. The Statistics Agency (BPS) is scheduled to release inflation and trade data on 1 Jul.

Higher transport and food inflation. We expect transport inflation to rise by 2.5% m-o-m from 1% in Apr, implying 4.7% y-o-y from 2.3% reflecting higher non-subsidized Pertamax fuel price hike by 32% in Jun (Appendix). We expect monthly food inflation to rise to 1% m-o-m in Jun from 0.4% in May, implying food inflation of 5.9% y-o-y from 5.4% in May, led by rice, red onion and red chili (Exhibit 2).

We expect higher inflation in 2026. We continue to expect 2026 inflation to average higher at 3.2% from 1.9% in 2025, driven by low base effect from the electricity tariff discount in Jan Feb 2025 with an upside risk to the upside due to El-Nino risk in 2H. In terms of trajectory, we expect inflation to average 2.8% in 2Q, down from 3.9% in 1Q before increasing to 3.1% in 2H.

Trade Preview: Goods Trade Surplus Stays Thin in May

Goods trade surplus remains low. We expect the goods trade surplus to remain low at US0.5bn in May, up from USD0.1bn in Apr (Exhibit 3). We expect exports to rise by 3.7% m-o-m (Apr: 1.6%), in line with higher China imports from Indonesia, which improved to 3% m-o-m from 12% contraction in Apr. Export growth is likely to moderate to 6.7% y-o-y in May, down from 22% in April.

Imports set to moderate. We expect imports to increase by 2.3% m-o-m in May, moderating from 31.3% in Apr, likely by capital goods, reflecting higher manufacturing PMI to 50 in May from 49 in Apr, while consumption imports to provide some offset in line with weak retail sales index. Additionally, oil imports likely to moderate, with oil price contracted by -8.7% m-o-m from 14% increase in Apr (Appendix). Import growth is likely to rise to 27% y-o-y from 22.5%.

We still expect wider CAD in 2026. We continue to forecast the current account deficit to widen to 1.5% of GDP in 2026 from 0.1% in 2025 (BI forecast: 0.5-1.3% deficit). Our forecast reflects the impact of Trump s reciprocal tariffs and spillovers from the closure of Freeport s Grasberg mining site and assumes an average Brent oil price of USD92/bbl this year.